Procter & Gamble: Procter & Gamble plans Walmart-like pact with Future Group - The Economic Times
Last year, executives at Procter & Gamble Co. PG % were alarmed when Wal-Mart Stores Inc. WMT % stocked a European competitor. The relationship between Wal-Mart and P&G is based on a simple principle - Procter and Gamble manufacturers various items and Wal-Mart sells them through. A focal point of Family Moments is a project with Procter & Gamble (NYSE: PG) to produce family-friendly TV programming, beginning with.
The two organizations are leaders within their industry and have managed to use their strengths in a way that further consolidates their market superiority. But this was not always true, as before the usage of technology, aroundthe two organizations had developed an adversarial relationship: Sam Walton felt it was a shame that two strong organizations could not collaborate more efficiently for their mutual interest.
Walton indicated that it was a shame that two quality companies could not work together effectively. This challenge became the rallying cry for the two companies" Grean and Shaw, With the introduction of technology, the relationship between Wal-Mart and Procter and gamble improved significantly.
Today, the two organizations collaborate at all levels of the supply chain. They united their efforts and now work as a unified team, following the same goals.
The Situation Once the executives of Wal-Mart and Procter and Gamble decided to work on their relationship, several processes of negotiation commenced.
Some of them were linked whilst others were independent.
Is Walmart’s Relationship With P&G In Trouble?
They all had the purpose of improving the collaboration between the two organizations and each of them had to compromise, win and lose in some cases. The suggestions promoted by Wal-Mart were based on the premises of a win-win situation. Since the retail giant desired increased flexibility from the manufacturer, it made most of the demands.
The negotiations began in and were concluded in Among the major result of the negotiation, one could point out the following: It was made easier by the elements of proximity and mutual trust Hanna, Analysis of the Negotiation The details of the negotiation between retail giant and one its main purveyors were undisclosed to the public. However, since the negotiation expended over a period of sixteen years, the reader could for am an opinion and conduct a rather accurate analysis of the discussions.
Wal-Mart's Relationship With Procter & Gamble Is Complicated: Here's Why
Stakeholders Both organizations were striving to better satisfy the buyer. The superior quality however meant increased prices, which were to the dissatisfaction of both retailer and customer. Wal-Mart on the other was willing to sell items of lower qualities as long as they respected the EDLP principles. Compare the Four Ordering Options 1.
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Technology has played a key role with Wal-Mart in three areas: A system needed to be developed to track sales by customer.Procter & Gamble - Bigger Than You Know
Once this system was developed tracking sales by customer was possible. Some of the questions Wal-Mart had were: These were real questions that needed to be answered. Wal-Mart was just coming online with a new Data Warehouse that allowed them to track sales of all products in each of their stores. Wal-Mart collected its own data then analyzed the results. Each of these will be explained later. Joint business scorecard A joint common scorecard was developed that reported, as described in Table 1: This common "language" allowed the partnership to focus on the end consumer and used combined data to measure joint progress.
Table 1 Wal-Mart Procter and Gamble Scorecard Driving out costs through Automation Leveraging technology to drive costs out of the supply system is another important aspect of the information systems function. The delivery of products to the end consumer involves a series of steps including raw material delivery, conversion to a finished product, transportation to a distributor or customer distribution center, transportation to the store and placement on the store shelf.
The degree to which all parties involved can drive costs out of these systems result in corresponding savings that can be passed on to the consumer in the form of lower product costs.
Role of Technology in Supply-Chain Integration In order to drive down costs product information is needed to move from the retailer back through the supply system, as shown in Figure 2. As better consumer data flowed back from the consumer to the raw material supplier, better forecasts could be anticipated and the right material put in place for finished product manufacturing.
This process also dramatically increased inventory turns which resulted in a reduction in the inventory of the entire system. Purchase orders, invoices, advanced shipment notification, and financial payment are just a few examples the electronic transmission of EDI.
It was critical that EDI not be used to automate poor business practices. It was imperative that we streamline the business "handoffs" then use automation to drive the process. To understand the value of simplifying the business process then applying technology, the business situation below provides a concrete example. Joint sales were up, standard scorecards to track the business, and both companies were proud of the progress of the partnership. All purchase orders were via EDI as were all invoices.
If the invoices matched, they would be paid automatically. If they did not match, both companies manually handled them. However, Wal-Mart defined billing accuracy as both the number of cases and the dollar amount of each case.
The automation through EDI only moved bad data faster and resulted in re-working both systems. Technology played a role in identifying and correcting pricing errors.
If any of the items did not match, they were flagged as an exception and electronically corrected. The customer service organization insured the data in both systems would be correct and EDI was used to drive down costs and improve the order cycle time.
The key decisions made by the retailers include: What are you going to buy?
Where are you going to put it shelf location? How are you going to price it? When should it be promoted?
Key questions for retailers can be answered by integrating data from manufacturers internal point-of-sale systems and third party market data providers such as Nielsen or IRI. It provides the platform resulting in information on what is selling and the selling price. It does not explain why nor does it provide insights into the market dynamics. Consumer needs are studied, products are then developed and manufactured to meet those needs. Finally, Third Party data providers help explain the market dynamics of a product.
- Wal-Mart's Relationship With Procter & Gamble Is Complicated: Here's Why
- Procter & Gamble plans Walmart-like pact with Future Group
- Walmart and Procter & Gamble Collaborate to Provide Family-Friendly TV Programming